Associated British Foods PLC (LSE:ABF) has agreed to buy Hovis Group from private equity firm Endless in a deal thought to be worth around £70 million, following a review of strategic options for its Allied Bakeries division.
ABF said the acquisition will merge the production and distribution operations of the two bakery businesses, aiming to deliver significant cost savings and efficiencies.
The move is intended to create a profitable and sustainable UK bread business capable of competing more effectively in a market where demand for pre-sliced, packaged bread has been in decline.
The company said the combined business will have a stronger platform for innovation in faster-growing segments of the bakery category, responding to changing consumer tastes with improved existing products and new ranges.
CEO George Weston said: "This transaction will create a UK bakeries business that is both profitable and sustainable over the long term.
"Supporting the Hovis and Kingsmill brands with well-invested and efficient operations will also enable innovation and growth.
"This solution will create value for shareholders, provide greater choice for consumers and increase efficiencies for customers."